I’m not here to teach you how to be a great investor. On the contrary, I’m here to tell you why very few of you can ever hope to achieve this status.

It doesn’t matter how intelligent you are, how many books you’ve read or how good you are with numbers. The truth is that you may never be as good as you think.

Sorry for the shock but this was a speech given by Mark Sellers of Sellers Capital to Harvard MBA student’s in 2007. It is a speech that helps to expose weaknesses and build on your strengths.

You can read all the Berkshire letters you want, but when it comes to crunch time, the majority of people end up buying high and selling low.

The past 11 trading days has proved just that. If you survived so far, well done, but expect to see more red and be excited about it, because this could another 1 in 10 year opportunity to stockpile stellar companies and ride it up when the economy gets better.

The second character trait of a great investor is that he is obsessive about playing the game and wanting to win.

Trait #3 – Willingness to learn from past mistakes

What sets some investors apart is an intense desire to learn from their own mistakes so they can avoid repeating them.

Trait #4 – Inherent sense of risk based on common sense

I believe the greatest risk control is common sense, but people fall into the habit of sleeping well at night because the computer says they should. The thing about common sense is that it isn’t very common.

Trait #5 – Confidence and Conviction

Great investors have confidence in their own convictions and stick with them, even when facing criticism.

Trait #6 – Get both sides of your brain working

If you don’t think clearly, you’re in trouble. There are a lot of people who have genius IQs who can’t think clearly.

Trait #7 – Ability to live through volatility

Number 7 is the most important, and rarest, investor trait of all.

To make money, you have to cope with volatility. Volatility is not risk.

Good luck during this difficult period. I hope to see you on the other end victorious.

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7 responses to “Finally! 7 Ways to Achieve Mind Blowing Returns”

I completely agree with you. Many investors want to believe that it is their intelligence, IQ, or genius that helps them do well in the market. But, in reality, it takes something that any average person can have or develop over time–let’s call it investor temperament.

I love the 7 traits you brought up. I agree that if investors can master these traits they can, as you say, “achieve mind blowing returns.” It is sad that people invest so much effort into learning to invest and then they simply end up buying high and selling low.

I have my eyes set on a few small caps with very wide economic moats, great businesses I can pick up that could easily result in 3-4 baggers over the next 10 years. Rarely are there any opportunities like this. But I’ll probably wait a bit longer to see some more red.

Good reminders for everyone. It’s true, you always tell yourself “pfff, I can keep my head when everything is falling down around me” but man, when you wake up and see a -4% -5% or more per day you really do need to tap into some almost disembodied objective viewing. Learn to eat some bitterness.

What I do now is keep super detailed notes about my thought process whenever I’m buying or selling. Pretty basic stuff: thesis for buying, thesis for selling. But the one list I have that is proving to be invaluable is called “lessons learned” where I am BRUTALLY honest with myself (something I’ve learned from reading Ray Dalio’s “Principles.” You can, and should, get it from his Bridgewater site.) The lessons learned goes into painful detail of my mistakes, why I thought it was good at the time, why I know now it was a bad idea, what it says about my strengths and weaknesses when it comes to making decisions etc. It’s sometimes hard to read, but it is a goldmine for constantly learning in the art of mastering self.Because in the end we value investors are truth hunters. If you hide your mistakes from yourself, you are screwed.

If you combine #1, 5, and 7 of the seven ways described above, you’d have someone who bought this morning, perhaps after having sold a week or two ago. Would have turned a tidy profit on many stocks today.

I know it shouldn’t be posted here. But I recently purchased your spreadsheets – they are great! (plus all value investing books I could dig up :)). So now its time for some serious reading before I get in.

I wanted to comment in the forum but it doesn’t seem to let me login properly eventhough I try to login with correct username and reset password.

I wanted to comment on recent post “OSV Screeners”.

It’s because I thought if it was possible to somehow implement a sheet where it was possible to have a complete list of companies that have financial data and import data for example book-to-market values in order to screen out cheap stock in a similar manner to the Piotroski screen. In that way it would be possible to get a quick overview of many companies and then calculate relevant percentile cuttoff points to narrow the search down for Piotroski stocks.

It could be very helpful in picking the companies that I would check in the Piotroski data sheet in your excel sheets. In this way it would save a lot a time. I’m not sure how I else would be able to check whether a company qualified to be in the highest percentile of high book-to-market stocks.

Thanks again for your nice blog post, I really enjoy reading them and this blog actually kickstarted my interest in value investing combined with my thesis on Piotroski screens on the scandinavian markets. The results here are also encouraging.

@ Graeme,Very impressed that you keep such a log. I should get in the habit of writing it down on paper as well. I normally take notes as well what keep track of what I write on this blog, but having it written on paper should help me out more.

@ Derek,I’ve been selective in what to buy. I still don’t want to buy anything.

I believe the key to 1,5,and 7 is to learn and understand how to put a value on a business. It is key to know what the prospects are and why they will continue to perform and grow. One way that I would start to find a high quality business is to look for companies with high ROE and low debt. Go through the balance sheet and cash flows. Continue with proper research to know how the business is run etc. I believe people sell low only because they look at the stock price and not the value.

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